EXHIBIT 10.13
CONFORMED COPY
THE SECURITY INTERESTS AND OTHER LIENS GRANTED PURSUANT TO THIS AGREEMENT ARE
SUBORDINATED, TO THE EXTENT PROVIDED IN THE INTERCREDITOR AGREEMENT, DATED AS OF
DECEMBER 26, 2001, AMONG FOOTHILL CAPITAL CORPORATION, AS AGENT, CYPRESS
MERCHANT BANKING PARTNERS L.P., CYPRESS OFFSHORE PARTNERS L.P., AMTROL INC. AND
CERTAIN OTHER PARTIES, TO THE SECURITY INTERESTS AND OTHER LIENS GRANTED BY THE
GRANTOR HEREUNDER IN FAVOR OF FOOTHILL CAPITAL CORPORATION, AS AGENT PURSUANT TO
ONE OR MORE MORTGAGES, PLEDGE AGREEMENTS, SECURITY AGREEMENTS OR OTHER SECURITY
DOCUMENTS REFERRED TO THEREIN.
================================================================================
$25,000,000
LOAN AND SECURITY AGREEMENT
among
AMTROL HOLDINGS, INC.,
as Guarantor,
AMTROL INC.,
and
WATER SOFT INC.,
as Borrowers,
CYPRESS MERCHANT BANKING PARTNERS, L.P.
and
CYPRESS OFFSHORE PARTNERS, L.P.,
as Lenders
Dated as of December 26, 2001
================================================================================
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS 1
SECTION 2. THE LOANS AND THE NOTES 3
SECTION 3. INTEREST 3
SECTION 4. REPAYMENT AND PREPAYMENT 4
SECTION 5. CONDITIONS TO CLOSING 4
SECTION 6. REPRESENTATIONS AND WARRANTIES 6
SECTION 7. COVENANTS 12
SECTION 8. CREATION OF SECURITY INTEREST 13
SECTION 9. GUARANTY 16
SECTION 10. EVENTS OF ▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇ ▇▇. EXPENSES; TAXES; INDEMNITY 22
SECTION 12. NOTICES 23
SECTION 13. MISCELLANEOUS 24
EXHIBITS:
A Form of Note
B Form of Warrant Agreement
ii
LOAN AND SECURITY AGREEMENT (this "AGREEMENT"), dated as of December 26,
2001, among AMTROL HOLDINGS, INC., a Delaware corporation ("HOLDINGS" or the
"GUARANTOR"), AMTROL INC., a Rhode Island corporation ("AMTROL"), WATER SOFT
INC., a Rhode Island corporation ("WATER SOFT") (each individually, a "BORROWER"
and collectively the "BORROWERS"), CYPRESS MERCHANT BANKING PARTNERS, L.P.
("CMBP") and CYPRESS OFFSHORE PARTNERS, L.P. ("COP"; together with CMBP, the
"LENDERS").
W I T N E S S E T H :
WHEREAS, AMTROL is party to a Credit Agreement dated as of November 13,
1996, as amended, among Holdings, AMTROL, various lending institutions and
Bankers Trust Company, as administrative agent, under which loans are currently
outstanding in the aggregate principal amount of $53,074,904.05 (the "EXISTING
SENIOR DEBT");
WHEREAS, in order to partially refinance the Existing Senior Debt, the
Borrowers are, on the date hereof, entering into a Loan and Security Agreement,
dated as of December 26, 2001 (as amended, supplemented or modified from time to
time, the "FOOTHILL LOAN AGREEMENT"), among Holdings, the Borrowers, the lenders
party thereto (the "FOOTHILL LENDERS") and Foothill Capital Corporation, as
arranger and administrative agent (in such capacity, the "FOOTHILL AGENT"),
which is to be guaranteed by Holdings and certain subsidiaries of Holdings (the
"SUBSIDIARY GUARANTORS") and secured by first priority liens on substantially
all of the assets of Holdings, the Borrowers and the Subsidiary Guarantors
(collectively, the "LOAN PARTIES"); and
WHEREAS, in order to provide additional funds to refinance Existing Senior
Debt, the Borrowers have requested, and each Lender has agreed, to make loans to
AMTROL on a senior secured basis on the terms and conditions set forth herein,
to be guaranteed by Holdings, Water Soft and the Subsidiary Guarantors and to be
secured by second priority liens on substantially all the assets of the Loan
Parties;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
hereinafter set forth, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
Capitalized terms used but not defined herein shall have the meanings set
forth in the Foothill Loan Agreement, and the following terms shall have the
following meanings:
"COLLATERAL" means all of each Borrower's now owned or hereafter acquired
right, title and interest in and to each of the following:
(a) Accounts,
(b) Books,
(c) Equipment,
2
(d) General Intangibles,
(e) Inventory,
(f) Investment Property,
(g) Negotiable Collateral,
(h) Real Property Collateral,
(i) money or other assets of each such Borrower that now or hereafter come
into the possession, custody or control of the Foothill Agent, any Foothill
Lender or any Lender, and
(j) the proceeds and products, whether tangible or intangible, of any of
the foregoing, including proceeds to insurance covering any or all of the
foregoing, and any and all Accounts, Books, Equipment, General Intangibles,
Inventory, Investment Property, Negotiable Collateral, Real Property, money,
deposit accounts, or other tangible or intangible property resulting from the
sale, exchange, collection, or other disposition of any of the foregoing, or any
portion thereof or interest therein, and the proceeds thereof.
"CONTROL AGREEMENT" means a control agreement, in form and substance
reasonably satisfactory to the Lenders, executed and delivered by the applicable
Borrower, the Lenders, and the applicable securities intermediary with respect
to a Securities Account or a bank with respect to a deposit account pursuant to
Section 8(g) hereof.
"CYPRESS CONTRIBUTION AGREEMENT" has the meaning set forth in Section 5.
"CYPRESS GUARANTY" has the meaning set forth in Section 5.
"CYPRESS LOAN DOCUMENTS" means the documents referred to in paragraphs (i)
through (iv) of Section 5(a), the Contribution Agreement, any Control Agreement
entered into pursuant to Section 8(g) hereof, any Canadian Documents entered
into pursuant to Section 7(b) hereof and any other agreement entered into, now
or in the future, by any Loan Party and the Lenders in connection with this
Agreement.
"CYPRESS MORTGAGES" has the meaning set forth in Section 5.
"CYPRESS OBLIGATIONS" has the meaning set forth in Section 9 hereof.
"CYPRESS STOCK PLEDGE AGREEMENT" has the meaning set forth in Section 5.
"EVENT OF DEFAULT" has the meaning set forth in Section 10 hereof.
"FOOTHILL LOAN DOCUMENTS" has the same meaning as "Loan Documents" under
the Foothill Loan Agreement.
"FOOTHILL OBLIGATIONS" has the same meanings as "Obligations" under the
Foothill Loan Agreement.
"FOOTHILL REPAYMENT DATE" means the date on which the Foothill Obligations
are paid in full and the Foothill Lenders have no further obligation to extend
credit under the Foothill Loan Agreement.
3
"GUARANTOR" means (a) Holdings, (b) each Subsidiary of Holdings other than
a Foreign Subsidiary (except, after the Canadian Perfection Date, AMTROL Canada)
or AMTROL and (c) each other Person that guarantees all or any part of the
Cypress Obligations.
"GUARANTY" has the meaning set forth in Section 5.
"INTEREST PAYMENT DATE" has the meaning set forth in Section 3(a) hereof.
"LOAN" and "LOANS" have the meaning set forth in Section 2 hereof.
"NOTE" and "NOTES" have the meaning set forth in Section 2 hereof.
"PERSONAL PROPERTY COLLATERAL" means Collateral other than Real Property.
"PIK NOTES" has the meaning set forth in Section 3(a) hereof.
"REAL PROPERTY" means any estates or interests in Real Property now owned
or hereafter acquired by any Borrower and the improvements thereto.
"REAL PROPERTY COLLATERAL" means the parcel or parcels of Real Property
identified on Schedule R-1 to the Foothill Loan Agreement and any Real Property
hereafter acquired by a Borrower.
"WARRANT AGREEMENT" has the meaning set forth in Section 5(a)(iii) hereof.
"WARRANTS" have the meaning set forth in Section 5(a)(iii) hereof.
SECTION 2. THE LOANS AND THE NOTES
Subject to the terms and conditions of this Agreement, each Lender agrees
to make a term loan (individually, a "LOAN" and collectively, the "LOANS") to
AMTROL on the Closing Date (as defined in Section 5 hereof) in an aggregate
principal amount not to exceed $23,769,083 for Cypress Merchant Banking
Partners, L.P. and $1,230,917 for Cypress Offshore Partners, L.P. The Loan of
each Lender shall be evidenced by a duly executed promissory note substantially
in the form of Exhibit A hereto (individually, a "NOTE" and collectively the
"Notes") in the principal amount of each Lender's Loan. The proceeds of the
Loans will be used to refinance the Existing Senior Debt.
SECTION 3. INTEREST
(a) The principal amount of the Notes shall bear interest at a rate equal
to 12.00% per annum. Interest shall be paid quarterly in arrears on the last day
of each fiscal quarter of the Borrowers or, if such day is not a Business Day,
on the next succeeding Business Day (each, an "INTEREST PAYMENT DATE"). Interest
owing to each Lender on each Interest Payment Date shall be
4
paid by the execution and delivery by the Borrowers of an additional Note to
such Lender (each, a "PIK NOTE") on such date in the principal amount of the
interest then due, subject to each Lender's right to elect to receive Holdings
Common Stock (as defined in Section 6 hereof) in lieu of PIK Notes on any
Interest Payment Date as provided in Section 3(b) hereof. Each PIK Note shall be
deemed to be one of the Notes and shall be entitled to the benefits of this
Agreement in all respects.
(b) Each Lender may request, by giving at least ten Business Days' prior
written notice to Holdings and the Borrowers, that, in lieu of receiving PIK
Notes in payment of accrued and unpaid interest on any Interest Payment Date,
such Lender receive Holdings Common Stock. In the event that a Lender shall
elect to receive any interest payment in Holdings Common Stock, the number of
shares of Holdings Common Stock issuable in respect of such interest payment
shall be calculated by dividing the dollar amount of such interest payment by an
agreed value of $100.00 per share. Holdings agrees to issue Holdings Common
Stock to each Lender whenever such Lender elects to receive the same in payment
of interest on the Notes under this Section.
(c) Any principal of the Notes and (to the extent permitted by law)
interest not paid when due shall bear interest from the date when due until paid
in full at the rate of 15.00% per annum. Interest shall be calculated on the
basis of a year of 360 days (consisting of twelve 30-day months). Any extension
of time for the payment of the principal of any Note resulting from the due date
falling on a day that is not a Business Day shall be included in the computation
of interest.
SECTION 4. REPAYMENT AND PREPAYMENT
(a) Each Note shall be due and payable on December 27, 2006 (the "MATURITY
DATE"); and
(b) AMTROL may prepay the Notes at any time or from time to time, in whole
or in part, without premium or penalty by giving the Lenders at least five
Business Days' prior written notice, which notice shall specify the date and
amount of such prepayment. Partial prepayments shall be in a minimum amount of
$1,000,000 and whole multiples thereof and shall be applied to the Notes of each
Lender on a PRO RATA basis based on the respective principal amounts of the
Notes then held by them. Accrued and unpaid interest on any amount prepaid shall
be paid on the date of such prepayment. Amounts prepaid may not be reborrowed.
SECTION 5. CONDITIONS TO CLOSING
Each Lender shall make its Loan on the date each of the following
conditions precedent has been satisfied (the "CLOSING DATE"):
(a) Each Lender shall have received the following documents in form and
substance satisfactory to it:
(i) this Agreement and the Notes dated the Closing Date and payable
to such Lender evidencing the Loan to be made on the Closing Date, duly
executed and delivered by the Borrowers and Holdings;
5
(ii) a joint and several guarantee of the Subsidiary
Guarantors and security documents and mortgages evidencing a second
priority security interest in substantially all of the assets of the
Borrowers, Holdings and each Subsidiary Guarantor, in form and substance
reasonably satisfactory to the Lenders and on substantially the same terms
as the Guaranty and the other Loan Documents relating to Collateral
delivered to the Foothill Agent under the Foothill Loan Agreement, duly
executed and delivered by each Loan Party party thereto (such guaranty,
the "CYPRESS GUARANTY"; such mortgages, the "CYPRESS MORTGAGES"; such
security agreement, the "CYPRESS STOCK PLEDGE AGREEMENT"; and such
contribution agreement, the "CYPRESS CONTRIBUTION AGREEMENT");
(iii) (A) the warrant agreement dated as of the Closing Date
among Holdings and the Lenders, as initial warrant holders, substantially
in the form of Exhibit B hereto (as amended, supplemented or modified from
time to time, the "WARRANT AGREEMENT"), duly executed and delivered by
Holdings and (B) duly executed and delivered warrants to purchase shares
of Holdings Common Stock (as defined in Section 6 hereof) (the
"WARRANTS"), in the denominations set forth in the Warrant Agreement;
(iv) the Intercreditor Agreement, dated as of the Closing
Date, among the Lenders, the Foothill Agent, the Borrowers and Holdings
(as amended, supplemented or modified from time to time, the
"INTERCREDITOR AGREEMENT");
(v) a resolution of the Board of Directors of each Loan Party,
certified on the Closing Date by the Secretary or Assistant Secretary of
the respective Loan Party authorizing the execution, delivery and
performance of each agreement, document or instrument delivered under
clauses (i) - (iv) above to which such Loan Party is a party;
(vi) UCC-1 financing statements and any other documents
reasonably required to evidence the perfection and second priority of the
Liens created by the Security Documents in favor of the Lenders; and
(vii) the executed legal opinion of:
(x) of Rhode Island counsel to the Loan Parties, dated
the Closing Date, in form and substance reasonably satisfactory to
the Lenders, and
(y) local counsel in each of Kentucky and Maryland
covering the Cypress Mortgages filed in each such jurisdiction.
(b) The representations and warranties made in this Agreement and
the Loan Documents, or any document delivered in connection herewith or
therewith, shall be true and correct in all material respects on and as of the
Closing Date.
(c) No Event of Default (as defined in Section 10 hereof) shall have
occurred and be continuing, or would result from the making of the Loans.
6
The Borrowers' acceptance of the proceeds of the Loans shall constitute a
representation and warranty that the statements in clauses (b) and (c) above are
true and correct as of the Closing Date both before and after the making of the
Loans on such date.
SECTION 6. REPRESENTATIONS AND WARRANTIES
To induce the Lenders to enter into this Agreement and to make the
Loans, each of Holdings and the Borrowers hereby represents and warrants to each
Lender that:
(a) NO ENCUMBRANCES. Each Borrower has good and indefeasible title
to its Collateral and the Real Property, free and clear of Liens except for
Permitted Liens.
(b) ELIGIBLE ACCOUNTS. The Eligible Accounts are bona fide existing
payment obligations of Account Debtors created by the sale and delivery of
Inventory or the rendition of services to such Account Debtors in the ordinary
course of the Borrowers' business, owed to the Borrowers without defenses,
disputes, offsets, counterclaims, or rights of return or cancellation.
(c) ELIGIBLE INVENTORY. All Eligible Inventory is of good and
merchantable quality, free from defects.
(d) EQUIPMENT. All of the Equipment is used or held for use in the
Borrowers' businesses and is fit for such purposes.
(e) LOCATION OF INVENTORY AND EQUIPMENT. All of the Inventory and
Equipment of the Borrowers (other than the Inventory and Equipment of AMTROL
Canada) is located at the locations (which locations are in a state of the
United States) identified on Schedule 5.5 to the Foothill Loan Agreement. All of
the Inventory and Equipment of AMTROL Canada is located at the locations (which
locations are in a province of Canada) identified on such Schedule 5.5. Except
as set forth on such Schedule 5.5, no Equipment or Inventory is stored with a
bailee, warehouseman or similar party that is not disclosed to the Foothill Loan
Agreement.
(f) INVENTORY RECORDS. Each Borrower keeps correct and accurate
records itemizing and describing the type, quality, and quantity of its
Inventory and the book value thereof.
(g) STATE OF INCORPORATION, ETC. The state of incorporation, the
chief executive office, organizational identification number and FEIN of each
Loan Party is identified in Schedule 5.7 to the Foothill Loan Agreement. No
Borrower holds any commercial tort claims as of the date hereof, except as set
forth in Schedule 5.7 to the Foothill Loan Agreement.
(h) DUE ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. (i) Each Loan
Party is duly organized and existing and in good standing under the laws of the
jurisdiction of its organization and qualified to do business in any state where
the failure to be so qualified reasonably could be expected to have a Material
Adverse Change.
(ii) Set forth on Schedule 5.8(c) to the Foothill Loan Agreement, is
a complete and accurate list of each Loan Party's direct and indirect
Subsidiaries (who are not Loan Parties),
7
showing: (A) the jurisdiction of their organization; (B) the number of shares of
each class of common and preferred Stock authorized for each of such
Subsidiaries; and (C) the number and the percentage of the outstanding shares of
each such class owned directly or indirectly by the applicable Loan Party. All
of the outstanding capital Stock of each such Subsidiary has been validly issued
and is fully paid and non-assessable.
(iii) Set forth on Schedule 5.8(c) to the Foothill Loan Agreement,
is a complete and accurate list of each Loan Party's direct and indirect
Subsidiaries (who are not Loan Parties), showing: (A) the jurisdiction of their
organization; (B) the number of shares of each class of common and preferred
Stock authorized for each of such Subsidiaries; and (C) the number and the
percentage of the outstanding shares of each such class owned directly or
indirectly by the applicable Loan Party. All of the outstanding capital Stock of
each such Subsidiary has been validly issued and is fully paid and
non-assessable.
(iv) Except as set forth on Schedule 5.8(c) to the Foothill Loan
Agreement, there are no subscriptions, options, warrants, or calls relating to
any shares of any Loan Party's Subsidiaries' capital Stock, including any right
of conversion or exchange under any outstanding security or other instrument. No
Loan Party or any of its respective Subsidiaries is subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire any
shares of any Loan Party's Subsidiaries' capital Stock or any security
convertible into or exchangeable for any such capital Stock.
(i) DUE AUTHORIZATION; NO CONFLICT. (i) As to each Borrower, the
execution, delivery, and performance by such Borrower of this Agreement and the
Loan Documents to which it is a party have been duly authorized by all necessary
action on the part of such Borrower.
(ii) As to each Borrower, the execution, delivery, and performance
by such Borrower of this Agreement and the Cypress Loan Documents to which it is
a party do not and will not (A) violate any provision of federal, state, or
local law or regulation applicable to any Borrower, the Governing Documents of
any Borrower, or any order, judgment, or decree of any court or other
Governmental Authority binding on any Borrower, (B) conflict with, result in a
breach of, or constitute (with due notice or lapse of time or both) a default
under any material contractual obligation of any Borrower, (C) result in or
require the creation or imposition of any Lien of any nature whatsoever upon any
properties or assets of any Borrower, other than Permitted Liens, or (D) require
any approval of any Borrower's interestholders or any approval or consent of any
Person under any material contractual obligation of any Borrower.
(iii) Other than the filing of financing statements, fixture
filings, and Cypress Mortgages, the execution, delivery, and performance by each
Borrower of this Agreement and the other Cypress Loan Documents to which such
Borrower is a party do not and will not require any registration with, consent,
or approval of, or notice to, or other action with or by, any Governmental
Authority or other Person.
(iv) As to each Borrower, this Agreement and the other Cypress Loan
Documents to which such Borrower is a party, and all other documents
contemplated hereby and thereby, when executed and delivered by such Borrower
will be the legally valid and binding
8
obligations of such Borrower, enforceable against such Borrower in accordance
with their respective terms, except as enforcement may be limited by equitable
principles or by bankruptcy, insolvency, reorganization, moratorium, or similar
laws relating to or limiting creditors' rights generally.
(v) The Lenders' Liens are validly created, perfected, and second
priority Liens, subject only to Permitted Liens.
(vi) The execution, delivery, and performance by each Guarantor of
the Cypress Loan Documents to which it is a party have been duly authorized by
all necessary action on the part of such Guarantor.
(vii) The execution, delivery, and performance by each Guarantor of
the Cypress Loan Documents to which it is a party do not and will not (A)
violate any provision of federal, state, or local law or regulation applicable
to such Guarantor, the Governing Documents of such Guarantor, or any order,
judgment, or decree of any court or other Governmental Authority binding on such
Guarantor, (B) conflict with, result in a breach of, or constitute (with due
notice or lapse of time or both) a default under any material contractual
obligation of such Guarantor, (C) result in or require the creation or
imposition of any Lien of any nature whatsoever upon any properties or assets of
such Guarantor, other than Permitted Liens, or (D) require any approval of such
Guarantor's interestholders or any approval or consent of any Person under any
material contractual obligation of such Guarantor.
(viii) The execution, delivery, and performance by each Guarantor of
the Cypress Loan Documents to which such Guarantor is a party do not and will
not require any registration with, consent, or approval of, or notice to, or
other action with or by, any Governmental Authority or other Person.
(ix) The Cypress Loan Documents to which each Guarantor is a party,
and all other documents contemplated hereby and thereby, when executed and
delivered by such Guarantor will be legally valid and binding obligations of
such Guarantor, enforceable against such Guarantor in accordance with their
respective terms, except as enforcement may be limited by equitable principles
or by bankruptcy, insolvency, reorganization, moratorium, or similar laws
relating to or limiting creditors' rights generally.
(j) LITIGATION. Other than those matters disclosed on Schedule 5.10
to the Foothill Loan Agreement, there are no actions, suits, or proceedings
pending or, to the knowledge of the Borrowers, threatened against the Borrowers,
or any of their Subsidiaries, as applicable, except for (a) matters that are
fully covered by insurance (subject to customary deductibles), and (b) matters
arising after the Closing Date that, if decided adversely to the Borrowers, or
any of their Subsidiaries, as applicable, reasonably could not be expected to
result in a Material Adverse Change.
(k) NO MATERIAL ADVERSE CHANGE. All financial statements relating to
the Borrowers or the Guarantors that have been delivered by the Borrowers or the
Guarantors to the Lenders have been prepared in accordance with GAAP (except, in
the case of unaudited financial statements, for the lack of footnotes and being
subject to year-end audit adjustments) and present
9
fairly in all material respects, the Borrowers' (or the Guarantors', as
applicable) financial condition as of the date thereof and results of operations
for the period then ended. There has not been a Material Adverse Change with
respect to the Borrowers (or the Guarantors, as applicable) since the date of
the latest financial statements submitted to the Lenders on or before the
Closing Date.
(l) FRAUDULENT TRANSFER. (i) Each Borrower is Solvent.
(ii) No transfer of property is being made by any Borrower and no
obligation is being incurred by any Borrower in connection with the transactions
contemplated by this Agreement or the other Cypress Loan Documents with the
intent to hinder, delay, or defraud either present or future creditors of the
Borrowers.
(m) EMPLOYEE BENEFITS. No "accumulated funding deficiency" (within
the meaning of Section 412 of the IRC or Section 302 of ERISA) has occurred
during the five-year period prior to the Closing Date with respect to any
Benefit Plan of Holdings or any of its Subsidiaries. Each Benefit Plan of
Holdings or any of its Subsidiaries has complied in all material respects with
the applicable provisions of ERISA, except where in any respect liabilities,
accumulated funding deficiencies or compliance failures which could occur could
not reasonably be expected to result, individually or in the aggregate, in any
Material Adverse Change.
(n) ENVIRONMENTAL CONDITION. Except as would not result in or could
not be expected to result in a material liability under Environmental Laws, (a)
to the Borrowers' knowledge, none of the Borrowers' properties or assets has
ever been used by Borrowers or by previous owners or operators in the disposal
of, or to produce, store, handle, treat, release, or transport, any Hazardous
Materials, where such production, storage, handling, treatment, release or
transport is or was in violation, in any material respect, of applicable
Environmental Law, (b) to the Borrowers' knowledge, none of the Borrowers'
properties or assets has ever been designated or identified in any manner
pursuant to any Environmental Law as a Hazardous Materials disposal site, (c)
none of the Borrowers have received written notice that a Lien arising under any
Environmental Law has attached to any revenues or to any Real Property owned or
operated by the Borrowers, and (d) except for matters resolved or remediated to
the written satisfaction of the relevant Governmental Authority, none of the
Borrowers have received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal or state governmental
agency concerning any action or omission by any Borrower resulting in the
releasing or disposing of Hazardous Materials into the environment in violation
of any applicable Environmental Laws.
(o) BROKERAGE FEES. The Borrowers have not utilized the services of
any broker or finder in connection with the Borrowers' obtaining financing from
the Lenders under this Agreement and no brokerage commission or finders fee is
payable by the Borrowers in connection herewith.
(p) INTELLECTUAL PROPERTY. Each Borrower owns, or holds licenses in,
all trademarks, trade names, copyrights, patents, patent rights, and licenses
that are necessary to the conduct of its business as currently conducted.
Attached as Schedule 5.16 to the Foothill Loan
10
Agreement is a true, correct, and complete listing of all material patents,
patent applications, trademarks, trademark applications, copyrights, and
copyright registrations as to which each Borrower is the owner or is an
exclusive licensee.
(q) LEASES. The Borrowers enjoy peaceful and undisturbed possession
under all leases material to the business of the Borrowers and to which the
Borrowers are a party or under which the Borrowers are operating. All of such
leases are valid and subsisting and no material default by the Borrowers exists
under any of them.
(r) DDAS. Set forth on Schedule 5.18 to the Foothill Loan Agreement
are all of the DDAs of each Borrower, including, with respect to each depository
(i) the name and address of that depository, and (ii) the account numbers of the
accounts maintained with such depository.
(s) COMPLETE DISCLOSURE. All factual information (taken as a whole)
furnished by or on behalf of the Borrowers in writing to any Lender (including
all information contained in the Schedules to the Foothill Loan Agreement
referred to herein or in the other Cypress Loan Documents) for purposes of or in
connection with this Agreement, the other Cypress Loan Documents or any
transaction contemplated herein or therein is, and all other such factual
information (taken as a whole) hereafter furnished by or on behalf of the
Borrowers in writing to any Lender will be, true and accurate in all material
respects on the date as of which such information is dated or certified and not
incomplete by omitting to state any fact necessary to make such information
(taken as a whole) not misleading in any material respect at such time in light
of the circumstances under which such information was provided. On the Closing
Date, the Closing Date Projections are based on, and as of the date on which any
other Projections are delivered to the Lenders, such additional Projections will
be based on the Borrowers' good faith reasonable estimate of its future
performance for the periods covered thereby.
(t) INDEBTEDNESS. Set forth on Schedule 5.20 to the Foothill Loan
Agreement is a true and complete list of all Indebtedness of each Borrower
outstanding immediately prior to the Closing Date that is to remain outstanding
after the Closing Date and such Schedule accurately reflects the aggregate
principal amount of such Indebtedness and the principal terms thereof.
(u) SPECIAL PURPOSE CORPORATION. Neither Holdings nor AMTROL
International Investments Inc. is engaged in any business other than related to
the entering into and performing its obligations under the Cypress Loan
Documents and the Foothill Loan Documents to which it is a party and the
ownership of the capital Stock of AMTROL (in the case of Holdings) and the
capital Stock of AMTROL Canada, AMTROL Germany, AMTROL Europe Ltd. and AMTROL
Netherlands B.V. (in the case of AMTROL International Investments Inc.).
(v) SENIOR SUBORDINATED NOTES. The subordination provisions
contained in the Senior Subordinated Notes are enforceable by the Lenders
against the Borrowers and the holders of such Senior Subordinated Notes, subject
to the effects of bankruptcy, insolvency, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally, general
equitable principles (regardless of whether enforcement is sought in equity or
at law) and an implied covenant of good faith and fair dealing and all Cypress
Obligations of Borrowers are or will be within the definition of "Designated
Senior Indebtedness" included in such provisions of the Indenture and Senior
Subordinated Notes.
11
(w) HOLDINGS STOCK AND WARRANTS. (i) The authorized capital stock of
Holdings immediately after the Closing Date shall consist of (A) 1,200,000 duly
authorized shares of common stock, par value $.01 per share, of Holdings (the
"HOLDINGS COMMON STOCK"), of which (I) 856,332 shares of Holdings Common Stock
are duly and validly issued and outstanding, fully paid and nonassessable, with
no personal liability attached to the ownership thereof, (II) 102,235 shares of
Holdings Common Stock are duly and validly reserved for issuance pursuant to
Holdings Junior Preferred, (III) 60,000 shares of Holdings Common Stock are duly
and validly reserved for issuance pursuant to the Warrants and (IV) 108,937
shares of Holdings Common Stock are duly and validly reserved for issuance to
AMTROL's and its Subsidiaries' directors, officers and employees pursuant to an
employee stock and stock option incentive programs and (B) 300,000 duly
authorized shares of "blank check" preferred stock, of which 150,000 shares have
been designated Junior Cumulative Convertible Preferred Stock, par value $.01
per share, of Holdings ("HOLDINGS JUNIOR PREFERRED"), 102,235 shares of which
are duly and validly issued and outstanding, fully paid and nonassessable, with
no personal liability attached to the ownership thereof;
(ii) All shares of Holdings Common Stock issuable upon the exercise
of the Warrants or pursuant to Section 3 hereof in payment of interest on the
Notes, if and when issued in accordance with the Warrants or the terms hereof,
will be duly and validly issued and outstanding, fully paid and nonassessable,
with no personal liability attached to the ownership thereof;
(iii) Other than this Agreement, the Warrants and Holdings Junior
Preferred, there are no outstanding warrants, options, agreements, convertible
securities and other commitments pursuant to which Holdings is or may become
obligated to issue, sell or otherwise transfer any capital stock of Holdings;
(iv) There are no preemptive rights, rights of first refusal or
other similar rights to purchase or otherwise acquire capital stock of Holdings
or any of its Subsidiaries pursuant to any applicable law, any organizational or
constitutive document of the Holdings or any agreement to which Holdings is a
party or may be bound;
(v) The Warrants have been duly authorized by Holdings and, when
duly executed, issued and delivered as provided in the Warrant Agreement and
this Agreement, will be duly and validly issued and outstanding and will
constitute valid and legally binding obligations of Holdings, entitled to the
benefits of the Warrant Agreement and enforceable against Holdings, in
accordance with their terms, except to the extent that such enforceability may
be limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting creditors' rights
generally and by general equitable principles (whether considered in a
proceeding in equity or at law); and
(vi) The offer, issuance and delivery of the Warrants to the
Lenders, as provided in this Agreement and the Warrant Agreement, and the
issuance and delivery of Holdings Common Stock upon the exercise of the Warrants
by the Lenders, are and will be exempt from the registration requirements of the
Securities Act of 1933, as amended, or any similar federal statute then in
effect (and a reference to a particular section thereof shall be
12
deemed to include a reference to the comparable section), and all applicable
state securities laws, as such laws are currently in effect.
SECTION 7. COVENANTS
(a) INCORPORATED COVENANTS. (i) The covenants contained in Articles
6 and 7 of the Foothill Loan Agreement, together with any definitions used, and
ancillary provisions referred to, in such Articles, are hereby incorporated in
this Agreement by reference MUTATIS MUTANDIS, as if fully set forth herein and
will be deemed to continue in effect for the benefit of the Lenders, giving
effect to any amendment, modification or waiver of the Foothill Loan Agreement
validly entered into pursuant thereto; PROVIDED that such covenants, as in
effect on the date of any termination of the Foothill Loan Agreement, shall
continue to be incorporated by reference herein notwithstanding any such
termination of the Foothill Loan Agreement.
(ii) Any provision of the Foothill Loan Agreement that is
incorporated by reference in this Agreement pursuant to this Section 7 shall be
subject to the condition that, as incorporated in this Agreement, (a) each
reference therein to "the Company" or "Administrative Borrower" or words of
similar import shall be deemed a reference to AMTROL hereunder, (b) each
reference therein to "each Bank", "any Bank", "a Bank", "the Administrative
Agent", the "Lender Group", the "Agent" or words of similar import shall be
deemed to be a reference to the Lenders hereunder, (c) each reference therein to
the "Commitment" or "Commitments" shall be deemed a reference to the Lenders'
obligation to make the Loans hereunder, (d) each reference therein to "this
Agreement" or words of similar import shall be deemed a reference to this
Agreement, (e) each reference therein to "Advances", "Term Loans" and "Loans" or
words of similar import shall be deemed to be a reference to the Loans under
this Agreement and the Notes, (f) each reference to "Cypress Loan Documents",
(g) each reference to "Default" or "Event of Default" or words of similar import
shall be deemed to be a reference to an Event of Default under this Agreement,
and (h) each reference therein to "the date of this Agreement" or words of
similar import shall be deemed a reference to the date hereof.
(b) COVENANT TO DELIVER CANADIAN DOCUMENTS. Upon execution and
delivery by AMTROL Canada of any documents guaranteeing the Foothill
Obligations, or granting Foothill and the Foothill Lenders a first priority
security interest in any of the assets of AMTROL Canada (the "CANADIAN ASSETS"),
Holdings and the Borrowers agree to cause AMTROL Canada to enter into guarantees
and security documents, in substantially the form delivered to the Foothill
Agent and the Foothill Lenders, guaranteeing the Cypress Obligations and
granting the Lenders a second priority security interest in the Canadian assets,
as the case may be, together the such documentation (including legal opinions)
as the Lenders may reasonably request in connection therewith.
(c) COVENANT TO DELIVER DUTCH DOCUMENTS. On or before January 11,
2002, deliver to the Lenders documents satisfactory to the Lenders relating to
the creation, perfection and establishment of the second priority of the
Lenders' Lien on approximately 66% of the Stock of AMTROL Netherlands in
accordance with the laws of the Netherlands.
13
(d) COVENANTS TO DELIVER REAL PROPERTY DOCUMENTS.
(i) RHODE ISLAND SURVEY. On or before January 4, 2002, the
Borrowers shall have caused to be delivered to the Lenders for the Real
Property located 1400 Division Street, West Warwick, Rhode Island, a
revised certified survey of such Real Property (the "RHODE ISLAND SURVEY")
indicating (i) a legal description matching the title insurance commitment
for such Real Property, (ii) a revised certification in form and substance
satisfactory to the Lenders and (iii) removal of Notes number 4 and 7 of
the Rhode Island Survey, which said Rhode Island Survey shall be in form
and substance satisfactory to the Lenders, in the Lenders' sole
discretion.
(ii) MARYLAND REAL PROPERTY. On or before January 20, 2002,
the Borrowers shall have caused to be delivered to the Lenders and the
issuer of the title insurance policy for the Real Property located at
▇▇▇▇'▇ Yard Area, Sparrows Point, Maryland (the "MARYLAND REAL PROPERTY")
a certified survey of the Maryland Real Property in form and substance
satisfactory to the Lenders and immediately thereafter cause to be
delivered to the Lenders amendments to the title insurance policy with
respect to the Maryland Real Property in accordance with the [Lenders']
escrow agreement with the title insurance company.
SECTION 8. CREATION OF SECURITY INTEREST
(a) GRANT OF SECURITY INTEREST. Each Borrower hereby grants to the
Lenders, a continuing security interest in all of its right, title, and interest
in all currently existing and hereafter acquired or arising Personal Property
Collateral in order to secure prompt repayment of any and all of the Cypress
Obligations in accordance with the terms and conditions of the Cypress Loan
Documents and in order to secure prompt performance by the Borrowers of each of
their covenants and duties under the Cypress Loan Documents. The Lenders' Liens
in and to the Personal Property Collateral shall attach to all Personal Property
Collateral without further act on the part of the Lenders or the Borrowers.
Anything contained in this Agreement or any other Cypress Loan Document to the
contrary notwithstanding, except for Permitted Dispositions (such defined term
being defined as incorporated herein pursuant to Section 7), the Borrowers have
no authority, express or implied, to dispose of any item or portion of the
Collateral.
(b) NEGOTIABLE COLLATERAL. In the event that any Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral, and if
and to the extent that perfection or priority of the Lenders' security interest
is dependent on or enhanced by possession, the applicable Borrower, immediately
upon the request of the Lenders, shall endorse and deliver physical possession
of such Negotiable Collateral to the Lenders PROVIDED that, at any time prior to
the Foothill Repayment Date, such endorsement and delivery shall be made to the
Foothill Agent.
(c) COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES, AND NEGOTIABLE
COLLATERAL. At any time after the occurrence and during the continuation of an
Event of Default, either Lender or its designee may (a) notify Account Debtors
of the Borrowers that the Accounts, chattel paper, or General Intangibles have
been assigned to the Lenders or that the Lenders have a security interest
therein, or (b) collect the Accounts, chattel paper, or General Intangibles
directly and
14
charge the collection costs and expenses to the Borrowers. Each Borrower agrees
that it will hold in trust for the Lenders, as the Lenders' trustee, any
Collections that it receives and immediately will deliver said Collections to
the Foothill Agent prior to the Foothill Repayment Date and to the Lenders
thereafter in their original form as received by the applicable Borrower.
(d) FILING OF FINANCING STATEMENTS; COMMERCIAL TORT CLAIMS; DELIVERY
OF ADDITIONAL DOCUMENTATION REQUIRED.
(i) Each Borrower authorizes the Lenders to file any financing
statement required hereunder, and any continuation statement or amendment with
respect thereto, in any appropriate filing office without the signature of such
Borrower where permitted by applicable law. Each Borrower hereby ratifies the
filing of any financing statement, and any continuation statement or amendment
with respect thereto, filed without the signature of such Borrower prior to the
date hereof, a copy of which will be delivered promptly to AMTROL.
(ii) If any Borrower acquires any commercial tort claim after the
date hereof that could reasonably be expected to result in a payment in excess
of $100,000, such Borrower shall immediately deliver to the Lenders a written
description of such commercial tort claim and shall deliver a written agreement,
in form and substance satisfactory to the Lenders, pursuant to which such
Borrower shall pledge and collaterally assign all of its right, title and
interest in and to such commercial tort claim to the Lenders, as security for
the Obligations (a "COMMERCIAL TORT CLAIM ASSIGNMENT").
(iii) At any time upon the request of a Lender, the Borrowers shall
execute and deliver to the Lenders, any and all financing statements, original
financing statements in lieu of continuation statements, amendments to financing
statements, fixture filings, security agreements, pledges, assignments,
Commercial Tort Claim Assignments, endorsements of certificates of title, and
all other documents (collectively, the "ADDITIONAL DOCUMENTS") that either
Lender may request in its reasonable discretion, in form and substance
satisfactory to the Lenders, to create and perfect and continue perfected or
better perfect the Lenders' Liens in the Collateral (whether now owned or
hereafter arising or acquired, tangible or intangible, real or personal), and in
order to fully consummate all of the transactions contemplated hereby and under
the other Cypress Loan Documents, including any Cypress Mortgages.
(iv) To the maximum extent permitted by applicable law, each
Borrower authorizes the Lenders to execute any such Additional Documents in such
Borrower's name and authorizes the Lenders to file such executed Additional
Documents in any appropriate filing office. To the maximum extent permitted by
applicable law, each Borrower authorizes the Lenders to file any such Additional
Documents without the signature of the applicable Borrower in any appropriate
filing office. In addition, on such periodic basis as the Lenders shall require,
the Borrowers shall (x) cause all patents, copyrights, and trademarks acquired
or generated by the Borrowers necessary or useful to the conduct of the
Borrowers' business that are not already the subject of a registration with the
appropriate filing office (or an application therefore diligently prosecuted) to
be registered with such appropriate filing office in a manner sufficient to
impart constructive notice of the Borrowers' ownership thereof, and (y) cause to
be prepared, executed, and delivered to the Lenders supplemental schedules to
the applicable Cypress Loan
15
Documents to identify such patents, copyrights, and trademarks as being subject
to the security interests created thereunder.
(e) POWER OF ATTORNEY. Each Borrower hereby irrevocably makes,
constitutes, and appoints each Lender (and any of such Lender's officers,
employees, or agents designated by such Lender) as such Borrower's true and
lawful attorney, with power to (a) if such Borrower refuses to, or fails timely
to execute and deliver any of the documents described in Section 8(d) hereof,
sign the name of such Borrower on any of the documents described in Section 8(d)
hereof, copies of which will be delivered to AMTROL thereafter, (b) at any time
that an Event of Default has occurred and is continuing, sign such Borrower's
name on any invoice or ▇▇▇▇ of lading relating to the Collateral, drafts against
Account Debtors, or notices to Account Debtors, (c) send requests for
verification of Accounts, (d) endorse such Borrower's name on any Collection
item that may come into the Lender's possession, (e) at any time that an Event
of Default has occurred and is continuing, make, settle, and adjust all claims
under such Borrower's policies of insurance and make all determinations and
decisions with respect to such policies of insurance, and (f) at any time that
an Event of Default has occurred and is continuing, settle and adjust disputes
and claims respecting the Accounts, chattel paper, or General Intangibles
directly with Account Debtors, for amounts and upon terms that such Lender
determines to be reasonable, and such Lender may cause to be executed and
delivered any documents and releases such Lender determines to be necessary. The
appointment of each Lender as each Borrower's attorney, and each and every one
of its rights and powers, being coupled with an interest, is irrevocable until
all of the Cypress Obligations have been fully and finally repaid and performed
and the Lenders' obligations to extend credit hereunder are terminated.
(f) RIGHT TO INSPECT. Each Lender (through any of their respective
officers, following the employees, or the Lenders) shall have the right, upon
reasonable request, from time to time during normal business hours to inspect
the Books, and following the Foothill Repayment Date, to check, test, appraise
the Collateral in order to verify the Borrowers' financial condition or the
amount, quality, value, condition of, or any other matter relating to, the
Collateral.
(g) CONTROL AGREEMENTS. Each Borrower agrees that, following the
Foothill Repayment Date, upon the request of the Lenders, it will enter into
Control Agreements with respect to its Security Accounts and DDA's. Each
Borrower hereby agrees to take any or all action that the Lenders request
following the Foothill Repayment Date in order for the Lenders to obtain control
in accordance with Sections 9-104, 9-105, 9-106 and 9-107 of the Code with
respect to any Collateral constituting Securities Accounts, DDA's, electronic
chattel paper, Investment Property and letter-of-credit rights. No arrangement
contemplated hereby or by any Control Agreement entered into following the
Foothill Repayment Date in respect of any Securities Accounts or other
Investment Property or any DDA, electronic chattel paper or letter-of-credit
rights shall be modified by the Borrowers without the prior written consent of
the Lenders. Upon the occurrence and during the continuance of an Event of
Default, the Lenders may notify any securities intermediary or depository to
liquidate the applicable Securities Account or DDA or any related Investment
Property maintained or held thereby and remit the proceeds thereof to the
Lenders.
16
(h) INTERCREDITOR AGREEMENT. The Lenders agree, for the benefit of
the Foothill Agent and the Foothill Lenders, that all the foregoing rights and
remedies of the Lenders in connection with the security interest in Personal
Property Collateral granted hereunder, and all other rights and remedies of the
Lenders in connection with mortgages and security interests granted pursuant to
the other Cypress Loan Documents, shall at all times be exercised strictly in
accordance with the terms of the Intercreditor Agreement.
SECTION 9. GUARANTY
(a) GUARANTY; LIMITATION OF LIABILITY. Each of Holdings and Water
Soft hereby, unconditionally and irrevocably, jointly and severally guarantees,
together with the Subsidiary Guarantors pursuant to the Cypress Guaranty, the
punctual payment when due, whether at stated maturity, by acceleration or
otherwise, of all the Loans, Notes, debts, principal, interest (including any
interest that, but for the provisions of the Bankruptcy Code, would have
accrued), premiums, liabilities, obligations, fees, charges, costs, covenants,
and duties of any kind and description owing by AMTROL to the Lenders pursuant
to or evidenced by the Cypress Loan Documents and irrespective of whether for
the payment of money, whether direct or indirect, absolute or contingent, due or
to become due, now existing or hereafter arising (collectively, the "CYPRESS
OBLIGATIONS"). Any reference in this Agreement or in the Cypress Loan Documents
to the Cypress Obligations shall include all amendments, changes, extensions,
modifications, renewals replacements, substitutions, and supplements, thereto
and thereof, as applicable, both prior and subsequent to any Insolvency
Proceeding of AMTROL now or hereafter existing under any Cypress Loan Document,
whether for principal, interest (including, without limitation, all interest
that accrues after the commencement of any case, proceeding or other action
relating to bankruptcy, insolvency or reorganization of AMTROL), fees, expenses
or otherwise (such obligations, to the extent not paid by AMTROL, being the
"GUARANTEED OBLIGATIONS"), and agrees to pay any and all expenses (including
reasonable counsel fees and expenses) incurred by the Lenders in enforcing any
rights under the guaranty set forth in this Section 9. Without limiting the
generality of the foregoing, the liability of Holdings and Water Soft shall
extend to all amounts that constitute part of the Guaranteed Obligations and
would be owed by AMTROL to the Lenders under any Cypress Loan Document but for
the fact that such Guaranteed Obligations are unenforceable or not allowable due
to the existence of a bankruptcy, reorganization or similar proceeding involving
AMTROL.
(b) GUARANTY ABSOLUTE. Holdings and Water Soft guarantee that the
Guaranteed Obligations will be paid strictly in accordance with the terms of the
Cypress Loan Documents, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of the Lenders with respect thereto. The obligations of Holdings and
Water Soft under this Section 9 are independent of the Guaranteed Obligations,
and a separate action or actions may be brought and prosecuted against Holdings
or Water Soft to enforce such obligations, irrespective of whether any action is
brought against AMTROL or whether AMTROL is joined in any such action or
actions. The guarantee of payment of Holdings and Water Soft under this Section
9 shall be irrevocable, absolute and unconditional irrespective of, and each of
Holdings and Water Soft hereby irrevocably waives any defenses it may now or
hereafter have in any way relating to, any or all of the following:
17
(i) any lack of validity or enforceability of any Cypress Loan
Document or any agreement or instrument relating thereto;
(ii) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Guaranteed Obligations, or any
other amendment or waiver of or any consent to departure from any Cypress
Loan Document, including, without limitation, any increase in the
Guaranteed Obligations resulting from the extension of additional credit
to AMTROL or otherwise;
(iii) any taking, exchange, release or non-perfection of any
Collateral of AMTROL or any of its Subsidiaries, or any taking, release or
amendment or waiver of or consent to departure from any other guaranty,
for all or any of the Guaranteed Obligations;
(iv) any change, restructuring or termination of the
corporate, limited liability company or partnership structure or existence
of AMTROL; or
(v) any other circumstance which constitutes, or might be
construed to constitute, an equitable or legal discharge of AMTROL for the
Guaranteed Obligations, or of Holdings or Water Soft under this Section 9,
in bankruptcy or any other instance (including, without limitation, any
statute of limitations) or any existence of or reliance on any
representation by the Lenders that might otherwise constitute a defense
available to, or a discharge of, Holdings, Water Soft, AMTROL or any other
guarantor or surety.
This Section 9 shall continue to be effective, or be reinstated, as
the case may be, if at any time any payment of any of the Guaranteed Obligations
is rescinded or must otherwise be returned by a Lender or any other Person upon
the insolvency, bankruptcy or reorganization of AMTROL or otherwise, all as
though such payment had not been made.
(c) WAIVER. Each of Holdings and Water Soft hereby waives
promptness, diligence, notice of acceptance and any other notice with respect to
any of the Guaranteed Obligations and this Section 9 and any requirement that
the Lenders exhaust any right or take any action against AMTROL or any other
Person or any Collateral. Each of Holdings and Water Soft acknowledges that it
will receive direct and indirect benefits from the financing arrangements
contemplated herein and that the waiver set forth in this Section 9(c) is
knowingly made in contemplation of such benefits. Each of Holdings and Water
Soft hereby waives any right to revoke this Section 9, and acknowledges that
this Section 9 is continuing in nature and applies to all Guaranteed
Obligations, whether existing now or in the future.
(d) CONTINUING GUARANTY; ASSIGNMENTS. This Section 9 is a continuing
guaranty and shall (i) remain in full force and effect until the later of (x)
the cash payment in full of the Guaranteed Obligations (other than
indemnification obligations as to which no claim has been made) and all other
amounts payable under this Section 9 and (y) the Maturity Date or earlier
termination of this Agreement, (ii) be binding upon Holdings, Water Soft, their
respective successors and assigns and (iii) inure to the benefit of and be
enforceable by the Lenders and their successors, pledgees, transferees and
assigns. Without limiting the generality of the foregoing clause (iii), any
Lender may pledge, assign or otherwise transfer all or any portion of
18
its rights and obligations under this Agreement, the Notes and the other Cypress
Loan Documents to any other Person, and such other Person shall thereupon become
vested with all the benefits in respect thereof granted such Lender herein or
otherwise.
(e) SUBROGATION. Neither Holdings nor Water Soft will exercise any
rights that it may now or hereafter acquire against AMTROL or any Subsidiary
Guarantor that arise from the existence, payment, performance or enforcement of
its obligations under this Section 9, including, without limitation, any right
of subrogation, reimbursement, exoneration, contribution or indemnification and
any right to participate in any claim or remedy of the Lenders against AMTROL or
any Subsidiary Guarantor or any collateral, whether or not such claim, remedy or
right arises in equity or under contract, statute or common law, including,
without limitation, the right to take or receive from AMTROL or any Subsidiary
Guarantor, directly or indirectly, in cash or other property or by set-off or in
any other manner, payment or security solely on account of such claim, remedy or
right, unless and until all of the Guaranteed Obligations and all other amounts
payable under this Section 9 shall have been paid in full in cash and the
Maturity Date or earlier termination of this Agreement shall have occurred. If
any amount shall be paid to Holdings or Water Soft in violation of the
immediately preceding sentence at any time prior to the later of the payment in
full in cash of the Guaranteed Obligations and all other amounts payable under
this Section 9 and the earlier of the Maturity Date and the early termination of
this Agreement, such amount shall be held in trust for the benefit of the
Lenders and shall forthwith be paid to the Lenders to be credited and applied to
the Guaranteed Obligations and all other amounts payable under this Section 9,
whether matured or unmatured, in accordance with the terms of this Agreement, or
to be held as collateral for any Guaranteed Obligations or other amounts payable
under this Section 9 thereafter arising. If (i) Holdings or Water Soft shall
make payment to the Lenders of all or any part of the Guaranteed Obligations,
(ii) all of the Guaranteed Obligations and all other amounts payable under this
Section 9 shall be paid in full in cash and (iii) the Maturity Date or earlier
termination of this Agreement shall have occurred, the Lenders will, at the
request of Holdings or Water Soft and expense, execute and deliver to Holdings
or Water Soft, as the case may be, appropriate documents, without recourse and
without representation or warranty, necessary to evidence the transfer by
subrogation to Holdings or Water Soft, as the case may be, of an interest in the
Guaranteed Obligations resulting from such payment by Holdings or Water Soft, as
the case may be.
SECTION 10. EVENTS OF DEFAULT
Any of the following events shall constitute an "EVENT OF DEFAULT"
under this Agreement:
(a) If AMTROL fails to pay when due and payable or when declared due
and payable, all or any portion of the Cypress Obligations (whether of
principal, interest (including any interest which, but for the provisions
of the Bankruptcy Code, would have accrued on such amounts), fees and
charges due the Lenders, reimbursement of Lender's expenses, or other
amounts constituting Cypress Obligations);
(b) If Holdings or any Borrower fails to perform, keep, or observe
any term, provision, condition, covenant, or agreement contained in
Sections 6.1, 6.2, 6.3, 6.4, 6.6, 6.10, and 6.11 of the Foothill Loan
Agreement, or comparable provisions of the Foothill
19
Loan Documents or the Cypress Loan Documents, within 10 Business Days of
the date when required (or within 5 days of the date when required in the
case of Section 6.2 or Section 6.3), or if a Loan Party otherwise fails to
perform, keep, or observe any other term, provision, condition, covenant,
or agreement contained in this Agreement or in any of the Cypress Loan
Documents to which such Loan Party is a party;
(c) If any material portion of the assets of the Borrowers or of
Holdings' and its Subsidiaries' other than the Foreign Subsidiaries (taken
as a whole) is attached, seized, subjected to a writ or distress warrant,
levied upon, or comes into the possession of any third Person;
(d) If an Insolvency Proceeding is commenced by Holdings or any
Borrower or any of their Subsidiaries (other than AMTROL Germany);
(e) If an Insolvency Proceeding is commenced against Holdings or any
Borrower, or any of their Subsidiaries (other than AMTROL Germany), and
any of the following events occur: (i) Holdings or the applicable Borrower
or the applicable Subsidiary consents to the institution of the Insolvency
Proceeding against it, (ii) the petition commencing the Insolvency
Proceeding is not timely controverted, (iii) the petition commencing the
Insolvency Proceeding is not dismissed within 45 calendar days of the date
of the filing thereof; PROVIDED, HOWEVER, that, during the pendency of
such period, the Lenders shall be relieved of their obligation to extend
credit thereunder, (iv) an interim trustee is appointed to take possession
of all or any substantial portion of the properties or assets of, or to
operate all or any substantial portion of the business of, Holdings or any
Borrower or any of their Subsidiaries, or (v) an order for relief shall
have been entered therein;
(f) If the conduct of all or any material part of the business
affairs of the Borrowers or of Holdings and its Subsidiaries other than
the Foreign Subsidiaries (taken as a whole) is enjoined, restrained, or in
any way prevented by court order;
(g) If there exists on all or any material portion of the assets of
the Borrowers or of Holdings and its Subsidiaries other than the Foreign
Subsidiaries (taken as a whole) a notice of Lien, levy, or assessment is
filed of record by the United States, or any department, agency, or
instrumentality thereof, or by any state, county, municipal, or
governmental agency, or if any taxes or debts owing at any time hereafter
becomes a Lien, whether ▇▇▇▇▇▇ or otherwise, upon all or a material
portion of the assets of Borrowers or of Holdings and its Subsidiaries
other than Foreign Subsidiaries (taken as a whole) and the same is not
paid on the payment date thereof;
(h) If a judgment or other claim becomes a Lien or encumbrance upon
all or any material portion of the properties or assets of Borrowers or of
Holdings and its Subsidiaries other than Foreign Subsidiaries (taken as a
whole), and such judgment or other claim is not fully covered by insurance
issued by a reputable and solvent insurance company and either shall be
final and non-appealable or shall not be vacated, discharged or stayed or
bonded pending appeal for any period of 45 consecutive days;
20
(i) If there is a default in any material agreement (including,
without limitation, any Foothill Loan Document or the Indenture) to which
Holdings or any Borrower or any of their Subsidiaries is a party and such
default (a) occurs at the final maturity of the obligations thereunder, or
(b) results in a right by the other party thereto, irrespective of whether
exercised, to accelerate the maturity of Holdings' or the applicable
Borrower's or their Subsidiaries' obligations thereunder, to terminate
such agreement, or to refuse to renew such agreement pursuant to an
automatic renewal right therein and the obligations of such applicable
Person under such agreement exceed $500,000;
(j) If Holdings or any Borrower or any of their Subsidiaries makes
any payment on account of Indebtedness that has been contractually
subordinated in right of payment to the payment of the Cypress Obligations
(including, without limitation, the Indebtedness evidenced by the Senior
Subordinated Notes), except to the extent such payment is permitted by the
terms of the subordination provisions applicable to such Indebtedness;
(k) If any warranty, representation, statement, or Record made to a
Lender by Holdings or any Borrower, its Subsidiaries, or any officer,
employee, agent, or director of any Borrower or any of its Subsidiaries
under or in connection with any Cypress Loan Document shall prove to have
been inaccurate in any material respect on or as of the date made or
deemed made;
(l) If the obligation of any Guarantor under its guaranty is limited
or terminated by operation of law or by such Guarantor thereunder;
(m) If this Agreement or any other Cypress Loan Document that
purports to create a Lien, shall, for any reason, fail or cease to create
a valid and perfected and, except to the extent permitted by the terms
hereof or thereof, second priority Lien on or security interest in the
Collateral covered hereby or thereby; or
(n) Any provision of any Cypress Loan Document shall at any time for
any reason be declared to be null and void, or the validity or
enforceability thereof shall be contested by Holdings or any Borrower, or
a proceeding shall be commenced by Holdings or any Borrower, or by any
Governmental Authority having jurisdiction over Holdings or any Borrower,
seeking to establish the invalidity or unenforceability thereof, or
Holdings or any Borrower shall deny that Holdings or any Borrower has any
liability or obligation purported to be created under any Cypress Loan
Document.
If any Event of Default shall occur and be continuing, the Lenders may, by
notice to the Borrowers, declare the outstanding principal of the Notes, all
interest thereon and all other amounts payable under this Agreement, the Notes
and the other Cypress Loan Documents to be forthwith due and payable, whereupon
the Notes, all such interest and all such amounts shall become and be forthwith
due and payable, without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived by the Borrowers; PROVIDED that,
in the case of an Event of Default arising pursuant to paragraphs (d) and (e) of
this Section 10, the Notes, all accrued and unpaid interest thereon and all
other amounts payable under this
21
Agreement and the other Cypress Loan Documents shall be automatically and
immediately due and payable without notice, presentment, demand, protest or
other formalities of any kind, all of which are hereby expressly waived by the
Borrowers. In addition, subject to the terms of the Intercreditor Agreement, the
Lenders may exercise any rights and remedies they may have against the Loan
Parties or the Collateral at law or in equity under any of the other Cypress
Loan Documents or otherwise, including, without limitation:
(a) Settle or adjust disputes and claims directly with Account
Debtors for amounts and upon terms which the Lenders consider advisable;
(b) Cause the Borrowers to hold all returned Inventory in trust for
the Lenders, segregate all returned Inventory from all other assets of the
Borrowers or in the Borrowers' possession and conspicuously label said returned
Inventory as the property of the Lenders;
(c) Without notice to or demand upon any Borrower or any Guarantor,
make such payments and do such acts as the Lenders consider necessary or
reasonable to protect its security interests in the Collateral. Each Borrower
agrees to assemble the Personal Property Collateral if the Lenders so require,
and to make the Personal Property Collateral available to the Lenders at a place
that the Lenders may designate which is reasonably convenient to both parties.
Each Borrower authorizes the Lenders to enter the premises where the Personal
Property Collateral is located, to take and maintain possession of the Personal
Property Collateral, or any part of it, and to pay, purchase, contest, or
compromise any Lien that in the Lenders' determination appears to conflict with
the Lenders' Liens and to pay all expenses incurred in connection therewith and
to charge the Borrowers therefore. With respect to any of the Borrowers' owned
or leased premises, each Borrower hereby grants the Lenders a license to enter
into possession of such premises and to occupy the same, without charge, in
order to exercise any of the Lender's rights or remedies provided herein, at
law, in equity, or otherwise;
(d) Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell (in the manner provided herein) the
Personal Property Collateral. The Lenders are hereby granted a license or other
right to use, without charge, for the benefit of the Lenders such Borrower's
labels, patents, copyrights, trade secrets, trade names, trademarks, service
marks, and advertising matter, or any property of a similar nature, as it
pertains to the Personal Property Collateral, in completing production of,
advertising for sale, and selling any Personal Property Collateral and such
Borrower's rights under all licenses and all franchise agreements shall inure to
the Lenders' benefit;
(e) Sell the Personal Property Collateral at either a public or
private sale, or both, by way of one or more contracts or transactions, for cash
or on terms, in such manner and at such places (including Borrowers' premises)
as the Lenders determine is commercially reasonable. It is not necessary that
the Personal Property Collateral be present at any such sale;
(f) The Lenders shall give notice of the disposition of the Personal
Property Collateral as follows:
22
(i) The Lenders shall give the Borrowers a notice in writing of
the time and place of public sale, or, if the sale is a
private sale or some other disposition other than a public
sale is to be made of the Personal Property Collateral, the
time on or after which the private sale or other disposition
is to be made; and
(ii) The notice shall be personally delivered or mailed, postage
prepaid, to the Borrowers as provided in Section 12, at least
10 days before the earliest time of disposition set forth in
the notice; no notice needs to be given prior to the
disposition of any portion of the Personal Property Collateral
that is perishable or threatens to decline speedily in value
or that is of a type customarily sold on a recognized market;
(g) Each Lender may credit bid and purchase at any public sale;
(h) Each Lender may seek the appointment of a receiver or keeper
to take possession of all or any portion of the Collateral or to operate same
and, to the maximum extent permitted by law, may seek the appointment of such a
receiver without the requirement of prior notice or a hearing;
(i) Any deficiency that exists after disposition of the Personal
Property Collateral as provided above will be paid immediately by Borrowers. Any
excess will be returned, without interest and subject to the rights of third
Persons, by the Lenders to Borrowers.
SECTION 11. EXPENSES; TAXES; INDEMNITY
(a) AMTROL agrees to pay all reasonable out-of-pocket expenses
incurred by each Lender and its affiliates, including the reasonable fees,
charges and disbursements of counsel for the Lenders and such affiliates,
in connection with the preparation and administration of this Agreement
and the Cypress Loan Documents, any amendments, modifications or waivers
of the provisions hereof or thereof, and the enforcement or protection of
their rights in connection with this Agreement or the Cypress Loan
Documents, including in connection with any workout, restructuring or
negotiations in respect thereof.
(b) AMTROL agrees to pay any and all present or future stamp or
documentary taxes or any other excise or property taxes, charges or
similar levies arising from any payment made hereunder or from the
execution, delivery or enforcement of, or otherwise with respect to, this
Agreement or the other Cypress Loan Documents to the relevant governmental
authority in accordance with applicable law.
(c) AMTROL agrees to indemnify each Lender and each of its
affiliates (each such Person, an "INDEMNITEE") against, and hold each
Indemnitee harmless from, any and all losses, claims, damages, liabilities
and related expenses, including the fees, charges and disbursements of any
counsel for any Indemnitee, incurred by or asserted against any Indemnitee
arising out of, in connection with, or as a result of the execution or
delivery of this Agreement or the other Cypress Loan Documents or any
agreement or instrument
23
contemplated hereby or thereby, the performance by the parties hereto or
thereto of their respective obligations hereunder or thereunder or the
making of the Loans or the use of the proceeds thereof, the purchase or
ownership of the Warrants or Holdings Common Stock, any actual or alleged
presence or release of Hazardous Materials on or from any property owned
or operated by the Borrowers, or any Environmental Liabilities and Costs
related in any way to any Loan Party, or any actual or prospective claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether based on contract, tort or any other theory and regardless of
whether any Indemnitee is a party thereto; PROVIDED that such indemnity
shall not be available to the extent that such losses, claims, damages,
liabilities or related expenses result from the gross negligence or
willful misconduct of any Indemnitee. All amounts due under this Section
shall be payable promptly after written demand therefor.
SECTION 12. NOTICES
Unless otherwise provided in this Agreement, all notices or demands
by Holdings or the Borrowers to the Lenders relating to this Agreement or any
other Cypress Loan Document shall be in writing and (except for financial
statements and other informational documents which may be sent by first-class
mail, postage prepaid) shall be personally delivered or sent by registered or
certified mail (postage prepaid, return receipt requested), overnight courier,
electronic mail (at such email addresses as Holdings or the Borrowers or the
Lenders, as applicable, may designate to each other in accordance herewith
followed by a hard copy sent by first-class mail), or telefacsimile to Holdings
and the Borrowers at its address set forth below:
(A) Borrowers and Holdings:
c/o AMTROL Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇,
ATTN: Chief Financial Officer
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
E-Mail: ▇▇▇▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇.▇▇▇.
(B) Lenders:
(i) Cypress Merchant Banking Partners, L.P.,
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
ATTN: ▇▇▇▇ ▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
E-Mail: ▇▇▇▇▇@▇▇▇▇▇▇▇▇▇.▇▇▇
(ii) Cypress Offshore Partners, L.P.,
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
ATTN: ▇▇▇▇ ▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
E-Mail: ▇▇▇▇▇@▇▇▇▇▇▇▇▇▇.▇▇▇
SECTION 13. MISCELLANEOUS
(a) No provision of this Agreement may be amended, modified or
waived except by an instrument in writing signed by the Borrowers, Holdings and
the Lenders. No failure on the part of either Lender to exercise, and no delay
in exercising, any right hereunder shall operate as a waiver thereof or preclude
any other or further exercise thereof or the exercise of any other right. The
remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
(b) This Agreement may be executed in any number of counterparts,
all of which taken together shall constitute one and the same instrument, and
any party hereto may execute this Agreement by signing any such counterpart.
(c) The provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns; PROVIDED, HOWEVER, that neither the Borrowers nor Holdings may assign
or otherwise transfer any of its rights or obligations hereunder without the
prior written consent of the Lenders; and PROVIDED FURTHER that any assignment
or transfer of an interest under this Agreement by the Lenders shall not be made
without the express written consent of the Foothill Agent.
(d) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. THE BORROWERS AND HOLDINGS
CONSENT TO THE NONEXCLUSIVE JURISDICTION AND VENUE OF THE STATE AND FEDERAL
COURTS LOCATED IN THE CITY OF NEW YORK. SERVICE OF PROCESS BY THE LENDERS IN
CONNECTION WITH ANY DISPUTE HEREUNDER SHALL BE BINDING ON THE BORROWERS AND
HOLDINGS IF SENT TO THE BORROWERS AND HOLDINGS AT THE ADDRESS SET FORTH ABOVE.
THE BORROWERS, HOLDINGS AND THE LENDERS EACH WAIVE ANY RIGHT IT MAY HAVE TO JURY
TRIAL IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT, THE NOTES OR TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED
ON CONTRACT, TORT OR ANY OTHER THEORY).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
AMTROL INC., as Borrower
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
---------------------------------------
Title: Exec. Vice President & CFO
WATER SOFT INC., as a Guarantor
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
---------------------------------------
Title: President
AMTROL HOLDINGS, INC., as a Guarantor
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
---------------------------------------
Title: President
CYPRESS MERCHANT BANKING PARTNERS, L.P.
By: Cypress Associates L.P., its general partner
By: The Cypress Group L.L.C., its general
partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------------
Title: Vice Chairman
CYPRESS OFFSHORE PARTNERS, L.P.
By: Cypress Associates L.P., its general partner
By: The Cypress Group L.L.C., its general
partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------------
Title: Vice Chairman
EXHIBIT A
FORM OF NOTE
THE SECURITY INTERESTS AND OTHER LIENS GRANTED PURSUANT TO THE CYPRESS LOAN
DOCUMENTS (REFERRED TO BELOW) SECURING THE OBLIGATIONS OF AMTROL REPRESENTED BY
THIS NOTE ARE SUBORDINATED, TO THE EXTENT PROVIDED IN THE INTERCREDITOR
AGREEMENT, DATED AS OF DECEMBER 26, 2001, AMONG FOOTHILL CAPITAL CORPORATION, AS
AGENT, CYPRESS MERCHANT BANKING PARTNERS L.P., CYPRESS OFFSHORE PARTNERS L.P.,
AMTROL INC. AND CERTAIN OTHER PARTIES, TO THE SECURITY INTERESTS AND OTHER LIENS
GRANTED BY THE GRANTOR HEREUNDER IN FAVOR OF FOOTHILL CAPITAL CORPORATION, AS
AGENT PURSUANT TO ONE OR MORE MORTGAGES, PLEDGE AGREEMENTS, SECURITY AGREEMENTS
OR OTHER SECURITY DOCUMENTS REFERRED TO THEREIN.
$___________* New York, New York
December 26, 2001
FOR VALUE RECEIVED, the undersigned, AMTROL INC. ("AMTROL"), hereby
unconditionally promises to pay to the order of [__________] (the "HOLDER") at
its principal office, ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, in
lawful money of the United States of America and in immediately available funds,
the principal amount of $__________ on December 27, 2006, and to pay interest on
the unpaid principal amount hereof from and including the date hereof to the
date on which such principal amount is due at the rate of 12.00% per annum, and
thereafter until paid in full (both before and after judgment) at the rate of
15.00% per annum. Interest payable prior to the maturity of this Note shall be
paid quarterly in arrears on the last day of each of AMTROL's fiscal quarters
or, if such day is not a Business Day, on the next succeeding Business Day.
Interest payable after maturity shall be payable on demand. Interest shall be
paid on each date when due hereunder by the execution and delivery by AMTROL to
the Holder of an additional promissory note substantially in the form of this
Note in the principal amount of the interest then due, or, at the Holder's
option by delivery of Holdings Common Stock in the amount and on the terms set
forth in Section 3 of the Loan Agreement referred to below. Interest shall be
calculated on the basis of a year of 360 days (consisting of twelve 30-day
months) and for the actual days elapsed. Any extension of time for the payment
of the principal of this Note resulting from the due date falling on a day that
is not a Business Day shall be included in the computation of interest.
This Note is one of the Notes referred to in, and is entitled to the
benefits of, the Loan Agreement, dated as of December 26, 2001, among the
Borrowers, Amtrol Holdings, Inc., the Holder, and __________** (as the same may
from time to time be amended, restated, supplemented or otherwise modified, the
"LOAN AGREEMENT"). Capitalized terms defined in the Loan Agreement and not
defined herein shall have the respective meanings set forth therein.
---------------
* For Loans made on Closing Date, insert $23,769,083 for Loan by CMBP and
$1,230,917 for Loan by COP.
** Insert name of Lender which is not the Holder.
2
This Note is guaranteed and secured as provided in the Cypress Loan
Documents and is subject to voluntary prepayment, in whole or in part as
provided therein.
In case an Event of Default under the Loan Agreement shall occur and
be continuing, the principal of and accrued and unpaid interest on this Note may
become, or may be declared to be, due and payable in the manner and with the
effect provided in the Loan Agreement.
AMTROL hereby waives presentment, demand, protest or notice of any
kind in connection with this Note.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
AMTROL INC.
By:_______________________________________
Name:
Title:
EXHIBIT B
FORM OF WARRANT AGREEMENT